Vacancy of class A business centers increases to 28%
According to the results of the first half of 2024, the vacancy rate in the office centers of the capital continues to grow with an actual decrease in rental rates, said head of the legal consulting department of UTG Kostiantyn Oliynyk.
According to the UTG study, the average weighted vacancy in business centers of Kyiv according to the results of January-June in class A increased from 27.4% to 28.1%, in class B - from 20.2% to 21.8%, in class C - from 14.5% to 14.8%.
“There is a change in tenant formats, a reduction in occupied space, and a move to areas remote from the center. The largest Ukrainian corporations have transferred employees from rented premises to their own administrative real estate. A number of companies have closed down their low-demand representative offices, and small and medium-sized ones are rationalizing their expenses. The practice of working from home has become widespread,” Oliynyk listed the trends.
At the same time, as of mid-2024, rental rates continue to decline. Thus, in class A, the average rate fell from $19.9/sq m per month at the end of 2023 to $17.5/sq m/month in the second quarter of 2024. In class B, the decline was not so significant - from $11.8 to $11.5/sq m/month. In class C, the average rate rolled back from $9.7 to $9.1/sq m/month.
“Given the rising cost of energy, the rise in utility bills (the need for generators, the loss of electricity/working time due to alarms), and OPEX (due to the growth of vacancy and the distribution of operating payments to a smaller number of operators), the burden on tenants continues to increase, and rental rates show a further decrease,” Oliynyk said.
Low market activity has caused a decrease in developer activity in the capital's office real estate market. Currently, the volume of professional real estate of classes A, B and C is 2.556 million sq m. At the same time, in the first half of the year, the supply expanded by only one project with a total area of 5,000 sq m at the intersection of Filatova Street and Saperne Field.
“More than 30 projects with a total area of about 800,000 sq m, whose opening was previously announced for 2024-2025, are most likely to be postponed,” Oliynyk noted.
UTG was founded in 2001. It developed over 1,300 real estate concepts. Over the years, with the company's participation, 4.7 million square meters of commercial space have been leased in Ukraine.